Steffy: Bank lays egg in omelet case

Updated 8:44 pm, Monday, October 29, 2012

Bank of America was part of a $25 billion settlement of government charges of mortgage abuses related to the nation's financial crisis.

Bank of America was part of a $25 billion settlement of government charges of mortgage abuses related to the nation's financial crisis.

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FILE - In this Jan. 25, 2009 file photo, a Bank of America branch office is shown in New York. The top federal prosecutor in Manhattan sued Bank of America for more than $1 billion on Wednesday, Oct. 24, 2012, for mortgage fraud against Fannie Mae and Freddie Mac during the years around the financial crisis. (AP Photo/Mark Lennihan, file) less

FILE - In this Jan. 25, 2009 file photo, a Bank of America branch office is shown in New York. The top federal prosecutor in Manhattan sued Bank of America for more than $1 billion on Wednesday, Oct. 24, 2012, ... more

Photo: Mark Lennihan, STF

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Bank of America was part of a $25 billion settlement of government charges of mortgage abuses related to the nation's financial crisis.

Bank of America was part of a $25 billion settlement of government charges of mortgage abuses related to the nation's financial crisis.

Photo: John W. Adkisson, Stringer

Steffy: Bank lays egg in omelet case

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Earlier this year, Paul Boudwin lost his investment banking job with Bank of America. This, though, is no ordinary tale of unemployment in the aftermath of the financial crisis.

Boudwin, 35, was a successful wealth manager at the bank's Houston office. Last year, he was recognized with the bank's "Chairman's Club" award, which came with a trip to Philadelphia for training at the University of Pennsylvania's prestigious Wharton School. He was on track for a big bonus.

Then, he got tripped up by a 14-year-old omelet.

Boudwin's story might seem ridiculous if it weren't so painful. Almost eight months after he lost his job, he said he's still "blown away and kind of confused" by what happened, much of which is now detailed in a lawsuit that Boudwin filed in Houston last week.

"This was so devastating to me, and I did everything they told me, I cleared every hurdle, because I wanted to go back to work," he said.

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Boudwin's case, of course, is a legal blip when weighed against Bank of America's courthouse travails. Earlier this year it was part of a $25 billion settlement of sweeping government charges of mortgage abuses, and just last week the feds slapped it with a $1 billion suit accusing it of a scheme known as "The Hustle," which allegedly funded sketchy mortgages with scant review.

Boudwin's ordeal began in July 2011, when the bank was reviewing its employment records to ensure it complied with new federal rules that, among other things, require a criminal background check for anyone who works at a mortgage originator.

When he was hired by the bank in 2006, Boudwin disclosed what he says was a legal misunderstanding from his college days.

He and his best friend ate breakfast at a Denny's in Scottsdale, Ariz., near the Arizona State University campus. The place was a student hangout, and after they finished their meal, they mingled with other friends for a while. Each assumed the other had paid the check. When they left the restaurant an hour or so later, a manager confronted them outside, accused them of walking the check and called the police.

They were arrested, paid a $50 fine and the $20 tab, tip included. The charge was later dismissed.

"There was no intent for not paying for an omelet," Boudwin said.

His 'conviction'

When Bank of America's review last year turned up the information about the omelet incident that Boudwin disclosed when he was hired, it set off a bureaucratic process impervious to reason. In a letter included in the lawsuit, the bank said the charge amounted to a "disqualifying conviction" under the law, which prohibits anyone convicted of an offense involving dishonesty or breach of trust from working at a financial institution.

Boudwin submitted court records showing the charges were dismissed. Bank officials assured him the matter would be sorted out, and the bank even filed for a waiver from the Federal Deposit Insurance Corp. on his behalf, court records show.

However, the bank said because of the new rules, Boudwin couldn't continue to work during the six to nine months it might take to get the waiver. He was put on an unpaid leave of absence, and his Wharton trip was canceled. He was told he would receive his back pay and bonus when he was reinstated, he said.

In late February of this year, his boss called. Boudwin thought his ordeal was over and the FDIC had granted the waiver. Instead, his boss told him he was being fired. The bank was tired of waiting, he said his boss told him.

Two weeks later, the FDIC granted the waiver, but Bank of America refused to reinstate Boudwin to his old position, according to his lawsuit. He was welcome to reapply, but his seniority, bonus and back pay would be lost.

Empty-handed

In the end, he got no severance, and none of his back pay or bonus, which is part of what he's now suing to recover. At the end of March, someone left on his doorstep a cardboard box with personal items cleared from his desk.

A Bank of America spokeswoman said the company hasn't been served with the lawsuit and declined to comment.

The FDIC didn't respond when I asked how many waivers like Boudwin's have been granted, but his story isn't unique.

Leonard Bates, a Des Moines, Iowa, attorney, represents a man who says he was fired from another big bank after it found he had a conviction almost 60 years ago for putting a cardboard cutout of a dime in a pay laundry's washing machine.

Bates said he's been contacted by at least 30 other employees from banks nationwide who have been fired for similar minor convictions.

Clearly, this wasn't how tougher standards for mortgage loan under- writers were supposed to be implemented. "Banks are being overly cautious," Bates told me. "Some banks have taken it upon themselves to go overboard."

Of all the sins committed by investment bankers in recent years, of all the billions Bank of America is paying to settle accusations relating to a smorgasbord of malfeasance stemming from the financial crisis, accidentally forgetting to pay for an omelet would seem a laughable offense.

It may have cost Boudwin his job, but it's Bank of America that has egg on its face.

Loren Steffy, loren.steffy@chron.com, is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Follow him online at blog.chron.com/lorensteffy, www.facebook.com/LorenSteffypage and twitter.com/lsteffy.